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TMI Blog2023 (2) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... even the risks assumed are different. We are, therefore, inclined to accept the stand of the ld. counsel for the assessee to bench mark the manufacturing segment and the trading segment separately. Rejection by ld. CIT(A) is solely on the ground that turnover of the trading segment is around 10% of the total turnover. This appears to be logical if considered as it If the same is considered in light of total sales made by the assessee for the year ended 31.03.2005, the picture is totally different. The assessee has recorded turnover of Rs. 1062 crores and 10% of which would be around 106 crores, claim of the ld. DR that it would be difficult to find comparables does not hold any water as several comparables can be found in Rs. 100 crores club. Thus we direct the AO/TPO to bench mark the international transactions separately segment wise with suitable comparables and decide the issue afresh after affording reasonable and adequate opportunity of being heard to the assessee. TP adjustment shall be made only with reference to international transactions undertaken by the assessee and not with reference to the overall turnover - In TP Regulations, price of only international t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the ld. CIT(A) erred on facts and in reducing the addition of Rs. 97,34,49,822/- made by the TPO/Assessing Officer on account of transfer pricing adjustment of Rs. 4,06,71,820/-. 2. The appellant craves leave to add to, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing. 5. The representatives of both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. 6. Briefly stated, the facts of the case are that the assessee, a subsidiary of Whirlpool USA, is engaged in the business of production, sales and distribution of Whirlpool appliances. During the year under consideration, the assessee has entered into the following international transactions with its AEs. Sl.No Particulars Amount (Rs) Segment Method 1 Import of raw material 4,88,96,695 Manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able companies at 3.80%, the international transactions in the trading segment were considered to be at arm s length. 10. The afore-stated margin comparisons were not accepted by the TPO who relied upon the order for the preceding year and rejected the segmental analysis undertaken by the assessee and instead, considered the entity level operating margin of the assessee holding that the assessee has international transactions in both the segments and the marketing chain of the assessee is common for both the segments. 11. The TPO further rejected the claim of the assessee towards adjustment on account of reduction in sales of Rs 83.89 crores and discount of Rs 30.06 crores stating that such adjustments relate to general market conditions and there is nothing extra-ordinary in the expenses incurred towards discount and it is a common practice in the market to provide discount on old models. 12. The TPO accordingly, computed the operating margin of the assessee at (-) 5.009% as under: Re- Working of Segmental profitability of WOIL for the financial year ended 31 March 2005 (With Adj.) Combined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Working capital Adjusted operating margin 1. Blue Star Ltd. 4.10% 2. Hotline Teletube and Components Ltd. 5.50% 3. Khaitan Electrical Ltd. 0.90% 4. Kirloskar Copeland NA 5. Salora International Ltd -1.70% 6. Videocon Appliances Ltd. 6.70% 7. Videocon Communications Ltd. 3.50% 8. Videocon International Ltd. 6.80% Average 3.69% 14. Accordingly, the TPO made adjustment of Rs 97,34,49,822/- and computed as under: Working of the ALP Rs. In Lacs Rs. In Lacs 3 Years Avg. ALP Margin - A 3.69% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions segment-wise. 21. We have given thoughtful consideration to the orders of the authorities below. At the very outset, we would like to refer to the decision of the Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Pvt Ltd 374 ITR 118 wherein the Hon'ble High Court held that in cases where the assessee is engaged in the manufacturing/sales trading activities it would be inappropriate to apply TNMM on entity wide basis. The relevant findings read as under: 9.1. In case the tested party is engaged in single line of business, there is no bar or prohibition from applying the TNM Method on entity level basis. The focus of this method is on net profit amount in proportion to the appropriate base or the PLI. In fact, when transactions are interconnected, combined consideration may be the most reliable means of determining the arm s length price. There are often situations where closely linked and connected transactions cannot be evaluated adequately on separate basis. Segmentation may be mandated when controlled bundled transactions cannot be adequately compared on an aggregate basis. Thus, taxpayer can aggregate the controlled tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra] we direct the Assessing Officer/TPO to bench mark the international transactions separately segment wise with suitable comparables and decide the issue afresh after affording reasonable and adequate opportunity of being heard to the assessee. 27. Alternative plea taken by the assessee becomes otiose and the appeal is allowed for statistical purposes. ITA No. 5472/DEL/2013 [Revenue s Appeal] 28. The sum and substance of the grievance of the Revenue is that the ld. CIT(A) held that the TP adjustment shall be made only with reference to international transactions undertaken by the assessee and not with reference to the overall turnover. 29. The ld. DR fairly stated that the view taken by the ld. CIT(A) is in line with the TP regulations. 30. We have given thoughtful consideration to the orders of the authorities below. In TP Regulations, price of only international transaction is to be determined for which adjustment of ALP is to be done in respect of international transactions only. Therefore, the TPO/Assessing Officer grossly erred in considering the total turnover and did not restrict the ALP adjustment to the international transactions. Therefore, we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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